The Big Story: Bush wants tax rebates; Bernanke sees need for aid

From The Associated Press

WASHINGTON D.C.—President Bush told congressional leaders privately on Thursday he favors personal income tax rebates and tax breaks for businesses to help avert a recession, officials said, as Federal Reserve Chairman Ben Bernanke joined in calls for an economic stimulus package.

Bush spoke with congressional leaders as top House aides worked on an economic rescue package that included more money for food stamp recipients and the unemployed as well as tax rebates and cuts.

One official said the president did not push for a permanent extension of his 2001 and 2003 tax cuts, many of which are due to expire in 2010. That would eliminate a potential stumbling block to swift action by Congress, since most Democrats oppose making the tax cuts permanent.

Bernanke voiced support for a stimulus package in an appearance before the House Budget Committee, but said it had to be quick and temporary.

“Putting money into the hands of households and firms that would spend it in the near term” is a priority, Bernanke told the committee.

Bush planned to talk about his criteria for the program at the White House Friday morning and later that day in a speech at a manufacturing plant in Frederick, Md.

In his committee appearance, Bernanke said such a plan should be aimed at quickly getting cash into the hands of people, especially those with low and moderate incomes. Bush wasn’t going to spell out any specifics in his remarks, but instead demand that any package be effective, simple and temporary, said White House press secretary Dana Perino.

Perino said that Bush and congressional leaders from both parties consulted via conference call Thursday for about 30 minutes about their plans to work together on growth measures. In the Capitol, House Speaker Nancy Pelosi, D-Calif., has talked of a package totaling $100 billion or more.

The rush to swing behind a stimulus plan underscored the political imperative of responding to a growing concern about the possibility of recession. Before Bernanke spoke, there was yet more downbeat economic and financial news.

The Commerce Department said new-home building plunged last year by 24.8 percent, the biggest drop in 27 years.

Also Wall Street extended its 2008 plunge Thursday, tumbling after a regional Federal Reserve report showed a sharp decline in manufacturing activity and as investors feared that downgrades of key bond insurers could trigger further trouble with souring debt.

The Dow Jones industrial average lost more than 300 points, or nearly 2.5 percent, and skidded to its lowest close since March 16. The Standard & Poor’s 500, the index closely watched by market professionals, fell nearly 3 percent.

Bernanke declined to endorse any particular approach in Capitol Hill appearance, but did say that he preferred one that would act quickly, and not have a long-term adverse impact on the deficit. “The design and implementation of the fiscal program are critically important,” he said.

Perino said conference call showed that both parties basically were in agreement that they needed to do something, and that they needed to cooperate and that it needed to happen quickly.

White House deputy press secretary Tony Fratto said he saw “no obstacle” to a speedy agreement with Congress.

The statements by the White House Thursday marked the first time that it has confirmed that Bush supports government intervention.

“There is reason to be hopeful when the president recognizes there is a problem in the country,” Pelosi said after the conference call with Bush.

House Majority Leader Steny Hoyer, D-Md., said, “It was useful and I hope it leads to a cooperative effort to come up with something to help stimulate the economy and do so quickly in a bipartisan fashion. He indicated that he wants to work together to get something done.”

Bernanke forecast slower growth in 2008 but not a recession.